When is Refinancing Worth it?
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Have you ever heard the pearl of wisdom that states you should only consider refinancing if your new interest rate is at least two points under your existing one? That could have been valid a while back, but as refinancing has been costing less recently, it's never the wrong time to think about a new mortgage! Refinancing has some advantages that often make it worth the initial expenditure several times over.
You may be able to bring down your interest rate (sometimes substantially) and have smaller mortgage payments with your refinanced mortgage loan. You could also have the option to "cash out" some of your equity, which you may use to consolidate debts, add on to your home, or finance a vacation. You could have the option to refinance to a shorter-term mortgage, giving you the ability to build your home equity quicker.
All these advantages do cost something, though. When you refinance, you're paying for many of the same things you were charged for during your current mortgage. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You might investigate paying points to be given a lower interest rate. When you pay (on average) 3% of the mortgage loan amount at the start, the savings for the term of the new loan can be significant. You might hear that the points may be deducted on your income taxes, but because tax regulations can be ever-changing, please consult with a tax professional before making decisions based on this.
Speaking of taxes, if you bring down your interest rate, it follows that you'll also be reducing the paid interest amount that you can deduct on your taxes. This is another cost that borrowers take into account. We can help you do the math! Call us at 562 320-0510.
Most borrowers find that the monthly savings quickly outweigh the up-front cost of refinancing. We can help you explore what your options are, considering the effect a refinance could have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at 562 320-0510 to get you started.
Curious about refinancing? Call us: 562 320-0510.